A closer look at our top equipment loans
Funding Circle: Best for low revenue requirement
Overview: Funding Circle has been around since 2010, with locations in Denver and London. It offers business term loans that you can use for equipment financing. While it accepts low annual revenue, your business will still need to provide two to three years of most recent business tax returns, making it a better fit for established businesses.
Why Funding Circle term loan is best for low revenue requirement: Funding Circle has the lowest listed annual revenue requirement on the list at $50,000 per year. If your business doesn’t meet the revenue requirements of big banks, it may still be able to qualify for a loan with Funding Circle.
Who Funding Circle term loan is good for: Smaller businesses that make less annually and may not qualify for an equipment-specific loan.
National Funding: Best for equipment leasing
Overview: National Funding was founded in 1999 and lists itself as both a small business funding company and an equipment leasing company. It offers loans for any type of new or pre-owned equipment.
Why National Funding is best for equipment leasing: A stand-out for National Funding is the Guaranteed Lowest Payment program for equipment leases. It also has no down payments required on new or pre-owned equipment leases.
Who National Funding equipment leases is good for: Any company that wants to focus on leasing equipment, such as a transportation company that likes to replace vehicles every few years to keep the fleet updated.
Triton Capital: Best for long preapproval period
Overview: Triton Capital, a loan marketplace, is based in San Diego and focuses on faster funding in as little as two days. Triton Capital offers a business equipment loan program with lasting pre-approval periods for if you need time to compare or access the equipment.
Why Triton Capital equipment loan is best for long preapproval period: Triton’s pre-approval is good for 90 days, and that includes a rate lock for that time period.
Who Triton Capital equipment loan is good for: Businesses that may need the time to shop around for loans or take time to secure specialty equipment or large fleets, like specialty manufacturers or large transportation companies.
SMB Compass: Best for large amounts
Overview: SMB Compass states it has expertise in SBA, asset-based and equipment lending and has provided over $250 million to over 1,250 businesses. Its equipment financing loans are funded through partner lenders. Rates start at a competitive 5.99 percent APR, and you may qualify with fair credit and one year in business. When you apply, SMB Compass will work with you to help find a lender that suits your equipment financing needs.
Why SMB Compass equipment financing is best for large amounts: SMB Compass’s equipment financing goes all the way up to $5 million. Loan amount also start at $25,000, making this a solid option for a wide range of equipment types.
Who SMB Compass equipment financing is good for: Companies that need a high amount of funding, such as expanding larger factory locations or commercial vehicle fleets.
Taycor Financial: Best for flexible requirements
Overview: Taycor Financial has offices in California and Utah and has been around for about 25 years. Taycor’s equipment financing helps newer businesses and startups access funding.
Why Taycor Financial equipment financing is best for flexible requirements: Taycor works with startups if the owners have two or more years of related experience. Plus, there are no minimum annual revenue requirements for loans under $250,000. Minimum personal credit score requirements are also low at 550.
Who Taycor Financial equipment financing is good for: Newer businesses that need more leniency in requirements or established businesses with lower credit.
Creditfy: Best for startups
Overview: Creditfy offers loans and lines of credit with a low personal credit score requirement. It’s ideal for startups in part because you can apply if you have a FICO score as low as 500. Creditfy’s time in business requirement is six months, which also makes it easier for startups to be approved for funding.
Why Creditfy is the best for startups: Creditfy has a 90 percent approval rate for loans, and even new companies are likely to qualify if they have enough revenue. The company also has terms up to eight years. This can allow a startup to keep monthly payments low as they continue to grow their business.
Who Creditfy is good for: Businesses with low personal credit scores may find Creditfy very appealing. It’s also good for brand new startups because the minimum time in business is just six months. You can receive approval in just a few hours and get funds within 24 to 48 hours.
Bank of America: Best for established businesses
Overview: Bank of America is a household name and, as the second-largest bank in the nation, has physical locations all across the country. It offers equipment financing and loans to established businesses.
Why Bank of America equipment financing is best for established businesses: Bank of America’s high minimum loan amount and stiff qualification requirements mean this loan is best for well-established companies that need to make a large purchase. Though Bank of America doesn’t disclose its maximum interest rate, its starting rate is competitive.
Who Bank of America equipment financing is good for: Established businesses like manufacturers or trucking companies that have been in business for a couple of years and make a high amount of annual revenue.
Balboa Capital: Best for truck financing
Overview: Balboa Capital, a division of Ameris Bank, states that it has funded over $7 billion nationwide. It has programs that focus specifically on semi-truck financing. However, it has a lower maximum loan than many other lenders, capping out at just $500,000. Despite this, Balboa Capital can offer quick loans for your equipment, with approval decisions issued in one hour and funding as soon as the same day.
Why Balboa Capital commercial truck financing is best for truck financing: If you’re looking to finance commercial trucks, Balboa’s flexible terms and same-day funds after approval make this lender an attractive choice.
Who Balboa Capital commercial truck financing is good for: Because Balboa Capital has specific programs for commercial trucks, it is good if your business needs to fund transportation. But it doesn’t restrict funding to just trucks, provided you have been in business for at least one year, have fair credit and have an annual revenue of $100,000.
What is an equipment loan?
Business equipment loans are generally a type of term loan that is used to purchase large-scale equipment for business use. Equipment loans might help with purchasing point-of-sale systems, commercial trucks, farming equipment, manufacturing machinery or medical devices.
Most are secured loans with the equipment you purchase as collateral, meaning the lender can take the equipment if you do not make loan payments. Equipment loans lead to ownership of the equipment, unlike leases which allow you to finance equipment for a number of years before the equipment goes back to the lender.
How does an equipment loan work?
You apply like any other type of loan, but in the application, you usually have to specify the equipment you wish to finance. You then get a lump sum of money to acquire that equipment. Depending on the lender and your qualifications, your loan amount could be greater than the purchase price of the equipment to help you cover soft costs, such as delivery or installation. Or you might receive a percentage of the equipment's purchase price, leaving you to cover the rest.
You pay back the loan over the term with interest. The payment schedule can be weekly, monthly or even annually or semi-annually, depending on what the lender allows. Annual and semi-annual payments benefit businesses that make money seasonally, such as farms.
Requirements for an equipment loan
Requirements vary by lender. Some work with startups, and others require at least two years in business. You may also see annual revenue requirements going from $50,000 to $250,000 or more. Personal credit score minimums often fall in the low to mid 600s, though some lenders will take credit scores in the 500s.
You may also have to show other financial health indicators, such as no recent personal bankruptcies or showing enough cash flow to cover a percentage of the equipment.
When you apply, you’ll have to provide common business documents like bank statements, tax returns, schedule of business debts and cash flow records.
Types of equipment loan
There are several types of equipment business loans, including leases and options backed by the SBA.
Term loans
Term loans are dispersed in one lump sum and then paid back monthly over an agreed-upon term, often up to five years. Term loans have varying interest rates and origination fees. You can use a term loan for almost any purpose, including buying equipment. Make sure you pay attention to early repayment penalties. You don’t want to pay a fee if you’re able to resolve your loan sooner than later.
SBA 7(a) loans
These SBA loans can help you purchase equipment or machinery. But they’re more flexible than dedicated equipment loans. SBA 7(a) loans can also fund a variety of other business purposes. If you need equipment and other funding for uses like inventory or working capital, you might want to look into this loan type. This loan type goes all the way up to $5 million.
Equipment financing
This is a common type that operates as a term loan, with one lump sum disbursed to cover the equipment cost. You pay it back with interest over the loan’s term. It’s a good option if you wish to own the equipment. But you often have to show strong financial health to acquire a loan with good rates.
Equipment lease
With an equipment lease, you pay the lender for the use of equipment. You usually pay monthly on the lease for the set term. These can be positive in cases where you want the equipment for a limited time. For instance, a taxi company may not want to own a fleet of vehicles because wear and tear limit the vehicles’ lifespan. If you eventually want to own the equipment, leasing is not a good option unless your lease contract has a purchase option.
Business lines of credit
Business lines of credit are revolving lines of credit. You will have a draw period, during which you can take out money and purchase equipment, and then a repayment period. During the draw period, you can make multiple draws as long as you still have remaining credit available. You’ll only pay interest on the portion of the line that you have currently borrowed. You can also use this line of credit for other business expenses beyond your equipment should the need arise.
Alternatives to equipment loans
If you decide a business equipment loan isn’t for you, you can look into alternatives for equipment loans, some of which are even unsecured.
Business credit cards
Consider business credit cards if you can find one with a high enough limit or if the equipment you’re working to purchase is less expensive. Credit cards come with added perks like cash back and fuel points.
Microloans
You might look into microloans if you’re purchasing less-expensive equipment. SBA microloans go up to $50,000, for instance. You may also find options like peer-to-peer lending or crowdsourcing options for microloans, which can be good alternatives for smaller companies and startups that don't meet other lenders' requirements. Just know that interest rates are likely to be higher and terms shorter than equipment loans offer.
Grants
Grants are free money that doesn’t have to be paid back, but you will need to meet requirements and compete against other applicants. Grants are available at the local, state, and federal levels. Keep in mind that it can take time to apply and receive your funds so grants may not be a good option for immediate financial needs. Still, grants can be very niche and cater to your industry or be carved out for certain small business founders, including women and veterans.
Semi-truck financing
Some equipment loans take the form of semi-truck financing. These are set up to fund semi trucks specifically, so the loan amounts might be more in line with what new and used trucks are going for. Pre-approval may stay good for weeks and give you time to find the right truck. You might see drawbacks like higher rates because semi trucks can be a risk to finance. You may also face high down payment requirements.
Crowdfunding
Crowdfunding platforms let you run funding campaigns to gather money from potential customers. With most types of crowdfunding, you don’t have to repay the money, though you may have to offer other incentives to contributors. Plus, you don’t need to meet a creditworthiness threshold to launch a campaign. However, your success depends entirely on how much buzz you generate around your business.
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